Is A Market Breakdown Underway? | Katie Stockton

Host Adam Taggart opened by noting that four of the “MAG7” stocks had entered bear-market territory, while the group had lost roughly $4 trillion in market value from its highs. More than 60% of the other S&P 500 stocks were also down at least 20% from their records, although the index remained positive for the year. Katie Stockton of Fairlead Strategies said she hoped the weakness would exhaust itself, but the market had not yet reached that point. The Nasdaq 100 had already fallen below Fairlead’s support level; the S&P 500 still had some room.

Stockton explained that Fairlead does not classify a level as broken merely because price briefly penetrates it: price must remain below the level for days or weeks, depending on the setup. Fairlead’s cloud model uses historical support and moving averages, with the S&P as its primary input and the Nasdaq 100 as a secondary one. Because the Nasdaq is heavily exposed to mega-cap technology, Stockton said a rebound there was especially important. If no rebound appeared despite short-term oversold readings, she would interpret that as confirmation that the breakdowns were real, including declines already seen in stocks such as Intel.

Asked what would happen if support failed, Stockton said the downside depended on each stock. Stocks that had rallied steeply could have a “vacuum” beneath them, forcing analysts to use Fibonacci retracement levels when ordinary peaks and troughs offered little guidance. On average, the next meaningful support areas were roughly 7% or 8% below the levels then being tested. She stressed that support was not a price target or magnet, but a likely zone where buyers might appear. A break would weaken intermediate-term momentum, potentially making the pullback deeper and longer and eventually threatening the still-intact cyclical uptrend.

Stockton said short-term oversold conditions near support made stabilization over the next few days plausible, but weekly indicators were not broadly oversold, so the decline could worsen after a temporary pause. Fairlead’s DeMark indicators, which compare current price bars with historical ones to measure trend exhaustion, had not generated broad equity buy signals because the declines had not lasted long enough. Some individual stocks had qualified; MGM, for example, had suffered 17 consecutive down weeks. Gold had just produced a more interesting DeMark signal, although Stockton said that did not yet make its broader downtrend attractive.

Taggart argued that the AI trade could experience a valuation-driven selloff without the underlying economic buildout stopping. He cited Jan van Eck’s view that demand for computing power still greatly exceeded supply and FreightWaves CEO Craig Fuller’s observation that shipping of data-center construction materials had not slowed. Stockton agreed that markets can diverge from the economy for extended periods, but said bear markets have historically been associated with weaker economic conditions, sometimes with a lead or lag. She therefore tracks credit spreads closely: a decisive widening has preceded major corrections and even bear markets without recessions.

Stockton said AI fundamentals could continue driving a long-term uptrend even through painful corrective phases. Technology and AI ETFs were testing support, so a post-election rebound that reclaimed those levels would argue against a major breakdown; a deeper decline could instead be a painful but healthy reset within the secular uptrend. She would rely on slower indicators such as monthly MACD, market breadth, sentiment, and credit spreads to identify a genuine trend reversal. Her short answer was “not yet”: the evidence did not show that the long-term trend had reversed, though Fairlead’s models had shifted toward greater risk management.

Taggart asked whether rising bond yields could pull capital away from equities now that bonds offered a positive real return. Stockton said investors would not generally move entirely into fixed income because equities remain the growth asset, and allocations should reflect age and risk tolerance. Still, she agreed that a secular rise in yields made bonds more attractive and could encourage defensive positioning. Fairlead had moved partly into Treasuries after being mostly invested in equities. Its ETF held both one-to-three-year and long-term Treasuries, although short duration looked relatively stronger technically.

Gold had fallen almost continuously for two months after its blow-off top and had recently reached new yearly lows. Stockton said DeMark and other overbought/oversold measures suggested a near-term low was within reach, with support near $3,900 per ounce and additional support around $3,600. She did not recommend buying into the decline. Instead, she wanted stabilization, evidence that buyers were discovering support, or a move above a short-term resistance level such as the 20- or 50-day moving average. Gold’s trend and momentum remained negative, but its low correlation with equities made a small position useful for diversification.

Stockton said the market’s short-term oversold condition made a positive reaction to the midterm election more plausible, regardless of the result; relief from uncertainty can help even when the outcome is not conventionally bullish. She reads wars through their effect on price action rather than forecasting geopolitical outcomes. Fairlead does not make six-month or one-year projections, but Stockton said credit spreads were uncomfortably close to a breakout that could make the first half of 2027 difficult. At the same time, strong November seasonality, improving breadth, recovering small caps, and retail strength left room for a stronger year-end.

Stockton recommended combining technology exposure, where support still held, with lower-volatility and lower-correlation assets rather than diversifying only between growth and value. Fairlead was comfortable holding modest positions in fixed income, gold, crypto or Bitcoin, and defensive sectors, while remaining underweight international markets relative to the U.S. unless a country-specific breakout appeared. Retail had become a favored near-term area because of November seasonality and improving momentum; homebuilders and other interest-rate-sensitive stocks also looked interesting while yields consolidated. Crude oil was another risk metric: a breakout from its large triangle above $105 per barrel in WTI could pressure equities.

Stockton described Investment Wisdom for Our Friends and Loved Ones, edited by Jenny Harrington and Rebecca Patterson with chapters from women in finance. Its contributors explain what they would tell family members about investing, and profits will go to financial-literacy organizations including the Council for Economic Education and Boys & Girls Clubs. Stockton’s chapter challenges passive buy-and-hold investing in favor of dynamically following long-term trends. She also described Fairlead’s equal-weight, sector-based Tactical Sector ETF, ticker TACK, which can shift into fixed income and gold, and the active technical-analysis Bitcoin ETF BNAV.